The commodity markets are experiencing notable declines as February begins, with the Energies sector leading the selloff. Prices across various commodities are down, reflecting broader market pressures and expectations surrounding U.S. monetary policy. The U.S. Treasury futures have shown slight gains, suggesting some investor confidence in potential interest rate cuts ahead of the March Federal Open Market Committee (FOMC) meeting.
Market Overview
The commodity complex is predominantly in the red as the new month unfolds. According to pre-dawn data, all sectors except Financials, particularly U.S. Treasury futures, are witnessing declines. This uptick in Treasury futures is likely a continuation of buying activity from last Friday, coinciding with political developments in Venezuela, where the self-proclaimed president made significant announcements regarding U.S. monetary policy.
The market is projecting a 25-basis point cut in the federal funds rate by June, which would be the first meeting chaired by Kevin Warsh, a figure associated with notable financial commentary.
The Energies sector is particularly affected, reporting an average loss of 7.3%. Natural gas prices are under severe pressure, with contracts down by 15.9%, reflecting the ongoing volatility in energy markets.
Sector Specifics
In the Grains sector, corn prices have also started the month on a downward trajectory. The March corn contract (ZCH26) has experienced a trading range of 3.75 cents, all lower, with trading volume increasing to 26,000 contracts. As of this report, corn is down 1.75 cents, following a decline of 2.5 cents last Friday. The National Corn Index closed January at $3.9475, marking a decrease of approximately 2.0 cents for the day.
Despite the downturn, commercial support remains, as indicated by the narrowing carry in futures spreads. The latest Commitments of Traders report revealed that funds held a net-short futures position of 31,670 contracts as of January 27, a reduction from the previous week.
Soybeans are also facing challenges, with the March contract (ZSH26) losing 12.5 cents overnight, sitting 6.25 cents lower at the time of writing. By the end of February, Brazil’s 2026 soybean crop will largely be harvested, affecting U.S. export interests. Current estimates suggest that U.S. shipments could total 1.146 billion bushels, which is a 38% decrease compared to last year.
Wheat markets are similarly down, with all sub-sectors reporting losses. Current discussions center around the impact of Winter Storm Fern on winter wheat crops, although historical resilience in wheat production is expected to mitigate severe impacts. As of now, the July Soft Red Winter (SRW) contract (ZWN26) is down 4.25 cents, while the July Hard Red Winter (HRW) contract (KEN26) is off 6.0 cents.
As the month progresses, traders and analysts will be closely monitoring these developments for potential shifts in market dynamics, particularly as they relate to U.S. agricultural exports and global commodity trends.
